A roundup of our favorite tax fraud cases.
Charleston, S.C.: A federal court has permanently barred preparers Latasha Failey and her sister Latoya Windham from preparing federal returns for others.
According to a civil complaint, Failey and Windham prepared federal income returns in North Charleston from 2009 to 2012, continually and repeatedly preparing returns that claimed false deductions or credits to understate clients’ tax liabilities.
The defendants falsely claimed education credits, child and dependent care credits, itemized deductions and dependency exemptions, according to the complaint. In 2013, Failey and Windham each pleaded guilty to two counts of aiding and assisting in the preparation and presentation of a false income tax return and were sentenced to prison and probation, respectively, the complaint states.
The court’s order also requires the sisters to give the federal government a list of all of their prep clients since Jan. 1, 2013.
Birmingham, Ala.: Preparer Donald E. Steele, 41, has been convicted for assisting in the preparation of false returns and tampering with a witness the IRS contacted to question about returns Steele prepared.
He was convicted on five counts of assisting in the preparation of a false federal income tax return in 2010 or 2011, and on one count of witness tampering in 2011.
At the time, Steele operated Max Tax, a tax prep business owned by his wife. According to evidence, Steele made false claims and fabricated deductions on federal returns for three different taxpayers. Multiple taxpayer witnesses testified that they were not given a copy of their prepared return.
When investigators later presented them their returns, they saw fraudulent claims that included false filing statuses, false dependents, false itemized expenses including medical and dental deductions and charitable contributions, false business expenses and deductions, and false disability claims and education expenses and credits.
The jury found Steele guilty of tampering with a witness for whom he had prepared a fraudulent 2010 return. The woman testified that she tried unsuccessfully many times to get a copy of her return from Steele, but once the investigation began, he showed up at her workplace and handed her a $200 check, which she considered a bribe not to talk to the IRS.
The maximum sentence for aiding in the preparation of a false federal income tax return is three years in prison and a $250,000 fine; the maximum for witness tampering is 20 years in prison and a $250,000 fine.
Placerville, Calif.: Preparer Teresa Marty, 56, of Pollock Pines, Calif., and owner of Advanced Financial Services, and two of her employees have pleaded guilty to charges related to filing more than 250 false claims for refunds.
Marty pleaded guilty to conspiring to file false claims for refund and conspiring to defraud the IRS. On August 24, Pamela Harris, Marty’s office manager, and Rebecca Bandera-Marty, a California certified preparer, pleaded guilty to one count of conspiring to file false claims. The three were indicted in June 2013 along with co-defendants Charles and Victoria Tingler. The Tinglers, who were clients, pleaded guilty to filing false claims in the spring of 2015 and will be sentenced in November.
Marty, Harris and Bandera-Marty admitted that they conspired to file false individual income tax returns claiming more than $60 million in false federal refunds. Marty and Harris recruited clients by falsely representing that the clients could legally receive sizable refunds by filing returns with 1099-OIDs. AFS prepared false 1099-OIDs that reported an amount equal to the clients’ debts as income and the same amount as income tax withheld, resulting in significant undeserved refunds.
The scheme included clients from 26 states and caused the IRS to pay out more than 40 refunds, totaling more than $9 million.
Marty also admitted that she and the Tinglers, with the help of Harris, filed multimillion dollar liens against government officials, including three IRS employees who were involved in the collection of taxes the defendants owed the IRS as a result of participating in the scheme.
Marty filed $84 million in liens against the then-acting U.S. Attorney for the Eastern District of California and a former Department of Justice Tax Division attorney involved in filing the suit to permanently enjoin Marty and AFS from preparing returns. The liens filed with the California Secretary of State unlawfully disclosed personal ID information of the government employees. Harris and Marty also engaged a commercial collection agency to collect one of the three false liens that Charles Tingler filed against an IRS revenue officer for $500,000.
Clients of AFS have been prosecuted in Arizona, Colorado, Florida, Georgia, Missouri, Oregon and Washington for filing the false claims prepared by Marty and AFS.
Marty’s sentencing is scheduled for January 4; she faces a maximum of 15 years in prison, a term of supervised release and monetary penalties. Bandera-Marty is scheduled to be sentenced on November 16 and Harris on January 4. They each face a maximum of 10 years in prison, a term of supervised release and monetary penalties.
